Managerial Accounting Chapters 4-6

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Marco Kofel

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Marco Kofel

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This flashcard set covers advanced topics in managerial accounting at the university level, focusing on costing methods, contribution margins, and activity-based costing. It delves into concepts like variable and absorption costing, operating leverage, and the impact of sales mix on net income. The flashcards explore how companies allocate resources, maximize profits, and analyze costs using different approaches. Ideal for business and finance students, this set helps understand the intricacies of cost management and its role in decision-making.

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18.03.2020 / 27.06.2022

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Which of the following is a false statement regarding assumptions of CVP analysis?

Total fixed costs remain constant over the relevant range.

Unit selling prices are constant.

Changes in volume or level of activity increase variable costs per unit.

All units produced are sold.

Total fixed costs remain constant over the relevant range.

Unit selling prices are constant.

Changes in volume or level of activity increase variable costs per unit.

All units produced are sold.

Mixed costs may be separated into fixed costs and variable costs by using

the relevant range method

the high-low method.

the contribution margin method.

all of the above.

the relevant range method

the high-low method.

the contribution margin method.

all of the above.

If the unit selling price is $500, the unit variable cost is $300, and the total monthly fixedcosts are $300,000, then the contribution margin ratio is

30%

40%

50%

60%

30%

40%

50%

60%

If activity level increases 25% and a specific cost increases from $40,000 to $50,000, thiscost would be classified as a

variable cost.

mixed cost.

fixed cost.

none of the above.

variable cost.

mixed cost.

fixed cost.

none of the above.

If total fixed costs are $900,000 and variable costs as a percentage of unit selling priceare 40%, then the break-even point in dollars is

$1,500,000

$360,000

$2,250,000

not determinable with the information given

$1,500,000

$360,000

$2,250,000

not determinable with the information given

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

True

False

True

False

The margin of safety indicates how much sales must increase before a company will be operating at a profit.

True

False

True

False

Sales mix is the relative percentage in which each product is sold when a company sells more than one product.

True

False

True

False

When multiple products exist, the break-even point in dollars is computed by dividing fixed costs by the weighted-average contribution margin.

True

False

True

False

When a company has limited resources, management must decide which product to make and sell in order to maximize contribution margin ratio.

True

False

True

False

Contribution margin per unit of limited resource is obtained by dividing the contribution margin per unit of each product by the number of units of the limited resource required for each product.

True

False

True

False

Operating leverage refers to the extent to which a company’s net income reacts to a given change in production.

True

False

True

False

Companies that have higher fixed costs relative to variable costs have higher operating leverage.

True

False

True

False

Under variable costing, all variable costs are considered product costs.

True

False

True

False

Fixed manufacturing costs are a product cost under absorption costing but are a period cost under variable costing.

True

False

True

False

For a company selling multiple products, the break-even point in dollars is computed by dividing fixed costs by the

contribution margin per unit.

contribution margin ratio.

weighted-average contribution margin per unit.

weighted-average contribution margin ratio.

contribution margin per unit.

contribution margin ratio.

weighted-average contribution margin per unit.

weighted-average contribution margin ratio.

In order to maximize net income a company should produce and sell the product with the highest.

contribution margin ratio.

contribution margin per unit.

contribution margin per unit of limited resource.

weighted-average unit contribution margin.

contribution margin ratio.

contribution margin per unit.

contribution margin per unit of limited resource.

weighted-average unit contribution margin.

Operating leverage refers to the extent to which a company’s net income reacts to a given change in

fixed costs.

production.

sales.

variable costs.

fixed costs.

production.

sales.

variable costs.

Under variable costing, all of the following are considered product costs except

direct materials.

direct labor.

variable manufacturing overhead.

variable selling and administrative expenses.

direct materials.

direct labor.

variable manufacturing overhead.

variable selling and administrative expenses.

All of the following are potential advantages of variable costing except that

its use is consistent with cost-volume-profit and incremental analysis.

variable costing net income is affected by changes in production levels.

variable costing net income is closely tied to changes in sales levels.

the presentation of fixed and variable cost components makes it easier to identify these costs.

its use is consistent with cost-volume-profit and incremental analysis.

variable costing net income is affected by changes in production levels.

variable costing net income is closely tied to changes in sales levels.

the presentation of fixed and variable cost components makes it easier to identify these costs.

Even in today’s automated environment, direct labor is sometimes the appropriate basis for assigning overhead cost to products.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

In the first stage of activity-based costing, overhead is assigned to products using costdrivers.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

The first step in activity-based costing is to identify and classify the major activitiesinvolved in the manufacture of specific products, and allocate manufacturing overhead tothe appropriate cost pools.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Before costs are allocated to the cost pools, the cost drivers for each cost pool must beidentified.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Under ABC, overhead costs are shifted from the high-volume product to the low-volumeproduct.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Activity-based costing does not change the amount of overhead costs, but it doesallocate those costs in a more accurate manner.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Overhead costs are not allocated by means of arbitrary volume-based cost drivers underABC.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Value-added activities increase the worth of a product or service to customers andinvolve resource usage that customers are willing to pay for.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Product-level activities in ABC are required to support or sustain an entire productionprocess.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

Just-in-time processing strives to eliminate inventories by using a “pull approach” inmanufacturing.

True

False

Tastatur-Befehle:

= drehen,

= vor-/rückwärts,

= scrollen

True

False

The last step in activity-based costing is to

Identify the major activities involved in the manufacture of specific products.

Compute the overhead rate per cost driver.

Identify the cost driver that has a strong correlation to the costs accumulated in thecost pool.

Assign manufacturing overhead costs for each cost pool to products.

Identify the major activities involved in the manufacture of specific products.

Compute the overhead rate per cost driver.

Identify the cost driver that has a strong correlation to the costs accumulated in thecost pool.

Assign manufacturing overhead costs for each cost pool to products.

Machine hours would be an accurate cost driver for

Assembly costs.

Inspecting costs.

Machining costs.

Machine setup costs.

Assembly costs.

Inspecting costs.

Machining costs.

Machine setup costs.

All of the following are benefits of ABC except it leads to

Elimination of all arbitrary cost allocations.

More accurate cost data.

Enhanced control over overhead costs.

Better management decisions.

Elimination of all arbitrary cost allocations.

More accurate cost data.

Enhanced control over overhead costs.

Better management decisions.

The level of ABC activities performed in support of an entire product line are classified as

Batch-level activities.

Facility-level activities.

Product-level activities.

Unit-level activities.

Batch-level activities.

Facility-level activities.

Product-level activities.

Unit-level activities.

Just-in-time processing strives to eliminate inventories by using a

Just in case approach.

Pull approach.

Push approach.

Process approach.

Just in case approach.

Pull approach.

Push approach.

Process approach.

The range over which a company is expected to operate is called the relevant range ofthe activity index.

True

False

True

False

A mixed cost contains both selling and administrative cost elements.

True

False

True

False

Variable costs are costs that remain the same per unit at every level of activity.

True

False

True

False

If a salesperson incurs $2,000 of expenses in servicing two customers and $4,000 ofexpenses in servicing four customers, the fixed costs are $1,000.

True

False

True

False

If revenue = $80 and variable cost = 40% of revenue, then contribution margin = $48.

True

False

True

False

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For a company selling multiple products, the break-even point in dollars is computed by dividing fixed costs by the

contribution margin per unit.

contribution margin ratio.

weighted-average contribution margin per unit.

weighted-average contribution margin ratio.

In order to maximize net income a company should produce and sell the product with the highest.

contribution margin ratio.

contribution margin per unit.

contribution margin per unit of limited resource.

weighted-average unit contribution margin.

Operating leverage refers to the extent to which a company’s net income reacts to a given change in

fixed costs.

production.

sales.

variable costs.

Under variable costing, all of the following are considered product costs except

direct materials.

direct labor.

variable manufacturing overhead.

variable selling and administrative expenses.

All of the following are potential advantages of variable costing except that

its use is consistent with cost-volume-profit and incremental analysis.

variable costing net income is affected by changes in production levels.

variable costing net income is closely tied to changes in sales levels.

the presentation of fixed and variable cost components makes it easier to identify these costs.

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